ACCA Taxation (F6) Practice Exam

What defines WDA for small pools?

1. Claiming up to £500 for any pool

2. Claiming up to £1,000 if the balance is below the limit for 12 months

3. Claiming up to £2,000 if using machinery

4. Claiming for only main pools

The correct answer is: Claiming up to £1,000 if the balance is below the limit for 12 months

The concept of Writing Down Allowance (WDA) for small pools is specifically defined by the annual amount that can be claimed based on the balance of the asset pool. The correct answer highlights that businesses can claim up to £1,000 if the balance of the pool is below this limit for 12 months. This provision is designed to simplify the depreciation process, allowing smaller businesses to receive a more immediate financial benefit from their investments in assets. By allowing a higher threshold for claiming WDA, it encourages businesses to invest in capital assets without being burdened by complex calculations and lower allowances that may not provide significant tax relief. Other options fall short in terms of accurately defining the specific criteria for small pool WDA claims. For instance, a claim cap of £500 is insufficient compared to the actual provision, while limits related to machinery or exclusively main pools do not align with the broader criteria established for small pool claims. Thus, focusing on the stipulated amount associated with balances under the defined threshold provides clarity on the eligibility for WDA when dealing with small pools.